Blogpost
AI as the next big differentiator in the hotel industry

AI as the next big differentiator in the hotel industry

Portrait of Vladimir Preveden
Partner, Co-Managing Partner Austria
Vienna Office, Central Europe
+43 1 53602-200
August 27, 2018

Companies that know the guest best will lead the way

Intelligent chatbots for travel bookings, robots that deliver your suitcase, and smart technologies that draw the curtains and manage the temperature in your room by speech control. This is a short excerpt from the list of new technologies that the hotel industry is using to improve the guest experience – and their business.

Many of the new technologies are based on artificial intelligence (AI), which can be applied along all phases of the travel experience. The ones I mention above are the more visible applications; other AI-based technologies leave a mark behind the scenes, where the guest hardly notices.

I strongly believe that AI will have a big and lasting impact on the guest experience and change the way the hotel and tourism industry works, since it can be used to give guests a highly personalized experience along the entire customer journey, long before the guest arrives at a destination. At the same time, it allows hotel groups to improve their operations. In the end, industry leaders will be those companies that know the guest best, and there’s no better tool for that than AI. At least not yet.

Good news for globetrotters: AI will improve their travelling-options.
Good news for globetrotters: AI will improve their travelling-options.

As we discuss in our Hotel Industry 4.0 study, the focus is now on understanding the guest as much as possible by getting the data management right, increasing direct booking shares, and providing guest services in a smart and systematic way. Used effectively, AI can help industry players do just this.

To illustrate my point, I’d like to share some thoughts on how AI is being used during the beginning phases of the travel experience, when guests start to narrow their choices and move closer to making a selection. In general, the six phases are: searching and being inspired; discovering and planning; booking; refining and improving; experiencing; and reflecting.

Inspired by AI

Deciding on a travel experience can be a daunting endeavor or a pleasurable one, depending on your point of view. Some people feel overwhelmed by the volume of information and impulses, while others feel inspired or are looking to become inspired.

With AI working in the background during the online search experience, companies can show users a narrow slice of what is likely to appeal to them based on what is known about the travel offering and the user’s preferences. This is one reason it’s so important for industry players to narrowly define their offering with very specific keywords and to provide an abundance of storytelling across various touchpoints on the internet, especially on YouTube.

Using AI in this way means that what you see on your screen while searching will be different than what I see on mine. The algorithms running in the background can even generate headlines that will appeal more strongly to me than to you.

This gives all industry players an amazing advantage they didn’t have in the past and is important as competition widens. The younger generations in particular are open to all sorts of travel experiences; when they begin a search, they may be equally interested in booking a trip to Austria, Italy or Thailand. This puts widely differing offerings in earnest competition with one another.

Startups are using AI in the early phases of the travel experience: to inspire guests, help them find what they want faster, and to help companies position themselves with specialized offerings. Vivere, for example, organizes and tags text and visual content about destinations around the world. And Avuxi analyzes millions of signals from social media to deliver the most popular locations for your profile in a particular city. In most cases, AI is used to match custom travel suggestions with user data about hobbies and likes.

Booking with AI

Similarly, AI can impact the guest booking experience and help boost sales. Hotelchamp is a self-learning software program that understands the user during booking and offers customized hotel and room recommendations, as well as additional services like child care or skiing lessons.

Then there are Revenue management systems (RMS), which help hotels reach maximum occupancy. They can do their jobs even better when they’re outfitted with AI and additional, third-party data sources, such as weather information or pre-booking data. IDeaS G3 Revenue Management System, the most commonly used system in the hotel industry will soon allow for a speech interface with Amazon Echo and Google Home in several languages. The next step will be to use deep learning, AI and smart speech control to optimally manage revenues.

From my experience, companies understand the vision behind AI and its potential but struggle with missing data, or data that is scattered in various systems and formats and is therefore less usable. Ideally, companies would be able to combine data from search behavior on the internet with that from their customer relationship management (CRM) systems and guest information collected locally, for instance via smart hotel room technology.

In addition, hotel groups need to establish digital guest platforms which connect all relevant information from all sources and systems in one place and which work along the entire customer journey. The guest should be able to access it via all devices. For instance, at the point of booking, the guest can decide how to check in, receive a digital room key and book amenities at the hotel and destination.

As in so many areas of the digital world, data – especially guest data – will be king. It is unclear whether established players or startups will be best at collecting and linking the diverse guest data that would give AI applications a boost, but first-movers will certainly have an advantage.

What is clear is that knowledge of the guest will be a decisive factor for the entire industry because companies can use it to boost all-around bookings that cover the full guest experience. Instead of just booking a flight, hotel and rental car on a website, guests will also purchase attraction tickets and wellness offerings. They will also make restaurant reservations and connect with local people in the destination via the same system.

That’s surely an appealing idea for those companies set to come out on top – and a threatening one for all the rest.

Further Reading